From the moment we enter the workforce, one of the overriding concerns of our lives is the question of whether or not we will be able to retire comfortably, with enough saved or incoming to allow us to continue to enjoy the lives we have become accustomed to. Unfortunately, recent downturns in the US economy have redefined the retirement scenario for many Americans. So it once again becomes time to ask ourselves, have we saved enough?
For starters, you need to determine what your retirement will cost, i.e. how much it will cost to live as a retired person as opposed to one still in the workforce. The common belief is that your expenses tend to diminish after retirement, and to an extent this is true. Leaving the workforce means you will no longer be responsible for items such as business wardrobe, cost of commuting, paying into Social Security, etc.
Retirees also tend to downsize. Once the kids are grown, a two bedroom apartment might be infinitely preferable to a four bedroom house. An increasing number of retirees are also living with their grown children, which can be an attractive notion when it comes to needing childcare at odd hours.
You may also find yourself downsizing from two cars to one. Many married retirees find themselves adopting the same schedule, reducing the need. In addition, many cities provide free public transportation for elderly and retired citizens.
Basically, you’re going to need about 70% of your current income to retire comfortably. Making a financial picture and planning from that early on is a great way to prepare.
Check into Social Security benefits and find out how much you will be eligible to receive, whether you start taking it early (at 62) or waiting until a later age. Sometimes waiting can actually increase benefits.
Sometimes it can be tempting to dip into retirement savings, especially during unexpected financial distress. Resist this temptation. You will lose principal and interest, and quite possibly tax benefits.
Start saving early on. Devise a plan and always put a little from whatever you make into your retirement savings. You’ll be surprised how quickly this will add up.
Look into basic investing. You don’t have to be a Wall St. guru in order to benefit from investment strategies. Financial advisors are inexpensive consultants and can help put you on track to productive investments.
Don’t retire too early. If you are still in good health, staying on the job a little longer can be a smart move. Even working two or three additional years can significantly increase your nest egg.
Consider inflation. Be sure to factor in a 3% average annual increase when planning for your post retirement cost of living.
In today’s economic climate, a successful retirement may seem like a pipe dream, but by following these simple tips, you can still enjoy your golden years in relative comfort.